Correlation Between Multisector Bond and Touchstone Arbitrage
Can any of the company-specific risk be diversified away by investing in both Multisector Bond and Touchstone Arbitrage at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Multisector Bond and Touchstone Arbitrage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multisector Bond Sma and Touchstone Arbitrage Fund, you can compare the effects of market volatilities on Multisector Bond and Touchstone Arbitrage and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Multisector Bond with a short position of Touchstone Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multisector Bond and Touchstone Arbitrage.
Diversification Opportunities for Multisector Bond and Touchstone Arbitrage
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Multisector and Touchstone is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Multisector Bond Sma and Touchstone Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Arbitrage and Multisector Bond is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Multisector Bond Sma are associated (or correlated) with Touchstone Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Arbitrage has no effect on the direction of Multisector Bond i.e., Multisector Bond and Touchstone Arbitrage go up and down completely randomly.
Pair Corralation between Multisector Bond and Touchstone Arbitrage
Assuming the 90 days horizon Multisector Bond Sma is expected to generate 1.95 times more return on investment than Touchstone Arbitrage. However, Multisector Bond is 1.95 times more volatile than Touchstone Arbitrage Fund. It trades about 0.12 of its potential returns per unit of risk. Touchstone Arbitrage Fund is currently generating about 0.22 per unit of risk. If you would invest 1,240 in Multisector Bond Sma on September 12, 2024 and sell it today you would earn a total of 136.00 from holding Multisector Bond Sma or generate 10.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multisector Bond Sma vs. Touchstone Arbitrage Fund
Performance |
| Timeline |
| Multisector Bond Sma |
| Touchstone Arbitrage |
Multisector Bond and Touchstone Arbitrage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multisector Bond and Touchstone Arbitrage
The main advantage of trading using opposite Multisector Bond and Touchstone Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multisector Bond position performs unexpectedly, Touchstone Arbitrage can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Touchstone Arbitrage will offset losses from the drop in Touchstone Arbitrage's long position.| Multisector Bond vs. Vanguard Information Technology | Multisector Bond vs. Hennessy Technology Fund | Multisector Bond vs. Janus Global Technology | Multisector Bond vs. Icon Information Technology |
| Touchstone Arbitrage vs. The National Tax Free | Touchstone Arbitrage vs. Ishares Municipal Bond | Touchstone Arbitrage vs. Multisector Bond Sma | Touchstone Arbitrage vs. Franklin High Yield |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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